Inflation latest updates: Inflation figure 'deeply worrying'; first-time buyers warned to wait; chancellor calls in Martin Lewis (2023)

Key points
  • Inflation remains at 8.7% - higher than expected
  • 'Deeply worrying' rise in core inflation
  • Forecast for peak interest rate rises to 6%
  • Not good for Bank of England, not good for PM, and not good for anyone with a mortgage | Ed Conway
  • Could old-school tax measure be re-introduced to ease rising mortgages? | Ian King
  • First-time buyers warned to wait
  • Chancellor calls in Martin Lewis
  • Having difficulty paying your mortgage? Has your rent gone up? Are you a landlord facing rising costs? Share your story

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Got a question on mortgages, rents or the cost of living?

A panel of experts will be answering your queries live on Sky News at 12.30pm and 4pm on Thursday.

You can use the form above to ask about mortgages, rents, inflation or any cost of living issue you're having.


Morrisons cuts 25% on average off almost 50 products

Morrisons is to cut the price of 47 products, including mince, tomatoes and butter.

Cereals, squash and pitta bread will see price drops and, for those planning a picnic in the sunny weather, the cost of scotch eggs will fall.

The average price reduction comes out at 25%, according to the supermarket chain - the fifth largest in the UK.

These prices will be held for at least eight weeks, it said.

This follows price freezes and cuts from Asda, Sainsbury's and Waitrose last week.

A trolley of 131 items at Morrisons costs £334.47 according to the latest Which? figures - only Asda is cheaper.

However, for a smaller basket of 40 items they're at the more expensive end at £79.09 - only Ocado and Waitrose are more pricey.


Six million disabled people to receive £150 cost of living payment

Payments will be made automatically until 4 July to anyone who was in receipt of certain disability benefits on 1 April.

It is one of several payments for vulnerable households, totalling £1,350.

Am I entitled?

Those receiving the following benefits qualify for the payment:

  • Disability Living Allowance
  • Personal Independence Payment
  • Attendance Allowance
  • Scottish Disability Benefits (Adult Disability Payment and Child Disability Payment)
  • Armed Forces Independence Payment
  • Constant Attendance Allowance
  • War Pension Mobility Supplement

What if I was waiting for my eligibility to be confirmed?

A small number of payments will be made after 4 July, where claimants were still awaiting confirmation of their eligibility or entitlement to qualifying disability benefits on 1 April.

How do I know if I've received it?

The payment reference on bank statements will appear as your National Insurance number followed by "DWPCOL".


Lodgers and downsizing: Homeowners cut costs as mortgages rise

Rising mortgages are forcing homeowners to find cost-cutting solutions like taking on lodgers, extra work or downsizing, research suggests.

Approximately one in 10 are undertaking extra work to cover costs, while 7% have a lodger - rising to 10% when taking into account those who intend to, according to The Mortgage Lender.

Downsizing was a route chosen by one in 10 homeowners, with another 20% considering the move.

The news comes as interest rates are expected to rise once more tomorrow, following disappointing inflation figures in May.

Stuck at 8.7%, standstill inflation is expected to drive up interest rates by between 0.25 and 0.5 percentage points tomorrow, when the Bank of England announces its decision.


'Eyewatering' hit to 1.4 million, mainly young, mortgage customers ahead, IFS warns

An estimated 1.4 million mortgage holders - half of them aged under 40 - could lose more than 20% of their disposable income as rates rise, according to a respected thinktank.

The Institute for Fiscal Studies (IFS) said it was an "eyewatering" prospect in a "serious shock" for the market, with 8.5 million people potentially having to spend a fifth of their income on mortgage payments.

Read our full report on this story...


First-time buyers may want to pause their search - and advice for people on fixed and variable mortgages

Alice Haine, personal finance analyst at Bestinvest, has been reacting to May's inflation figure - which, despite predictions, did not fall.

It means a rise in the Bank of England interest rate seems nailed on tomorrow lunchtime - either by 0.25 percentage points or 0.5.

Average deals for a two-year fixed are already over 6%, and Ms Haine says "first-time buyers looking to secure a new mortgage now will find their affordability levels heavily compromised by the combination of high inflation and high interest rates".

She goes on: "It might, therefore, be wise to wait and see whether the situation improves before signing up to a product that stretches their finances to the limit."

Homeowners on variable rates "must brace their finances for an instant hit... as any increase will be passed on in full".

Ms Haine says those whose fixed deals are due for renewal "should seek out a good independent mortgage broker – one that will deliver practical solutions to the many issues that come with higher monthly repayments".

Those whose deals run for another year or two can breathe easy at the moment but that doesn't mean they can't act now to start preparing for an uptick in payments.

"The best strategy for them is to get ahead of a future jump in mortgage costs by overpaying on their mortgage now, even by a small amount while also paying down any unsecured debts such as credit cards, loans and store cards to free up cash."

Overpaying a mortgage can be as simple as increasing your direct debit payment, with some lenders allowing borrowers to make ad hoc payments whenever they want – though read the small print as overpayments are typically capped at 10% of how much a borrower owes.

Overpaying not only reduces the balance, but also the amount of interest and, more importantly, helps borrowers adjust their finances to a larger monthly repayment before it becomes mandatory.


Savings rate 'boom' may be 'nearing peak'

While the prospect of a 0.25 or 0.5 percentage point increase in interest rates would be more bad news for mortgage holders, savers should benefit.

If you're just joining us, inflation has reportedly come to a standstill - at 8.7% - despite expectations it would fall, raising the odds of the Bank of England increasing rates tomorrow.

Average savings rates have already ticked upwards, according to data from Moneyfacts.

  • One-year fixed savings rate: 4.49% - up from 4.47% yesterday
  • Easy access savings: 2.34% - up from 2.33%
  • One-year fixed cash ISA: 4.21% - up from 4.2%
  • Easy access ISA rate: 2.46 - up from 2.45%

"Rising rate expectations have been hell for borrowers, but a boom time for savers," saidSarah Coles, head of personal finance at the financial services company, Hargreaves Lansdown.

She said savers should not become "too focused" on rate predictions, explaining whether they lock into a one-year or five-year fixed rate should first depend on when they need the money.

"But if you don't need it for five years, it's worth considering taking advantage of five-year rates" because they will likely be lower 12 months down the line, she said.

"We may be nearing the peak of rate expectations, so it makes sense to at least consider locking in the rate rises while you can."


Spotted: Martin Lewis in No 11 amid bleak inflation numbers

It's no doubt been a rather difficult morning for Chancellor Jeremy Hunt as it was announced that inflation has not decreased at all - instead remaining stuck at 8.7%.

It was also revealed today that public sector debt topped £2,567.2bn at the end of May, which is equivalent to 100.1% of GDP - so perhaps the chancellor is on the lookout for some money saving advice.

Such advice could be provided by the money saving expert himself, who was spotted leaving No 11 Downing Street a short while ago.

Martin Lewis emerged from the chancellor's official residence shortly before 11am with a cheery smile on his face, although he did not comment to the cameras.


Why is UK inflation higher than comparable countries?

Turning back now to this ONS chart showing UK inflation remains higher than comparable countries...

Sarah Coles, head of personal finance, Hargreaves Lansdown, has offered an explanation for why this might be, saying: "We're in the uniquely unfortunate position of having the same kind of wage hikes as the US, and the same kind of energy price rises as Europe – so we're enduring the worst of both worlds, and facing higher and stickier inflation than elsewhere.

"It means that even as some of the most alarming price rises ease off for things like food and energy, we're stuck with core inflation that's on the march."

Hope on the horizon

Despite months of anticipated falls in inflation falling to materialise, Ms Coles says there is hope...

"Lower energy costs will eventually feed into prices across the board, and we should see the pain at the supermarket subside a little in the coming months.

"However, in an awful lot of cases this isn't going to bring prices down, they'll just get more expensive more slowly. It means the pressure on our household finances isn't going anywhere in a hurry."



Is inflation good for mortgage holders? ›

Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit increases, raising interest rates, which benefits lenders.

What is the New Bank of England interest rate? ›

The new Bank of England base rate

The latest Bank of England base rate is: 5.00%. This is an increase of 0.50%, and was announced by the Bank of England (BoE) on 22 June 2023.

What is the current interest rate? ›

Current mortgage and refinance interest rates
ProductInterest RateAPR
20-Year Fixed Rate7.24%7.27%
15-Year Fixed Rate6.56%6.59%
10-Year Fixed Rate6.65%6.67%
5-1 ARM6.02%7.81%
5 more rows

Will interest rates rise again? ›

Will interest rates continue to rise? In all likelihood, yes, interest rates will rise again. Raising interest rates is one of the main tools the BoE has to bring down inflation, with the rationale being that higher borrowing costs will mean people are less likely to spend and more inclined to save.

Who gets rich during inflation? ›

Inflation benefits those with fixed-rate, low-interest mortgages and some stock investors. Individuals and families on a fixed income, holding variable interest rate debt are hurt the most by inflation.

Who is most hurt by inflation? ›

Low-income households most stressed by inflation

Prior research suggests that inflation hits low-income households hardest for several reasons. They spend more of their income on necessities such as food, gas and rent—categories with greater-than-average inflation rates—leaving few ways to reduce spending .

Will interest rates drop in 2023? ›

Mortgage Rate Projection for 2023

But many forecasts expect rates to begin to fall this year. In their latest forecast, Fannie Mae researchers predicted that 30-year fixed rates will trend down throughout 2023 and 2024.

How much will my mortgage be if interest rates rise? ›

If you're on a fixed-rate mortgage, you don't need to worry about a rise in interest rates yet. Your mortgage rate and monthly repayments will remain the same for the agreed period of time (three years, five years etc.), regardless of whether interest rates rise or fall.

Where are interest rates going in the next 5 years? ›

The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.

How high will interest rates go in 2023? ›

Though Fed policymakers skipped an 11th successive increase to the federal funds rate —the borrowing rate for commercial banks and credit unions—at their June meeting , officials revised the 2023 peak rate projection up to 5.6% from the 5.1% target projected in March.

Will mortgage rates go down in 2024? ›

Chief Economist at First American Financial Corp, Mark Fleming, says an interest rate drop may not happen for several months. "Possibly in 2024, but it will depend on the Fed's decisions about raising rates in the second half of the year," says Fleming.

What is the lowest mortgage rate in history? ›

The lowest recorded rate for a 30-year fixed-rate mortgage was 2.65% in January 2021,This was likely due to the effects of COVID-19.

Will mortgage rates go down 2025? ›

Beyond this year, the group expects mortgage rates to average 4.4% in both 2024 and 2025. Bank of America: Researchers at the investment bank expect mortgage rates to fall to 5.25% by the end of 2023.

How long will interest rates stay high? ›

The squeeze on mortgage costs is set to last until at least 2025 with interest rates expected to rise again this week. Experts have warned that rates are unlikely to start coming down again before the end of next year as inflation remains stubbornly high.

Does interest rates going up lead to value going down? ›

When interest rates are rising, both businesses and consumers will cut back on spending. This will cause earnings to fall and stock prices to drop. On the other hand, when interest rates have fallen significantly, consumers and businesses will increase spending, causing stock prices to rise.

Why do the rich get richer during inflation? ›

The more people who go broke, the more money moves up. The result is the wealth continues to concentrate in the hands of fewer and fewer people. This happens because inflation hurts the lower incomes but actually enriches the higher incomes.

Why are retired people hurt by inflation? ›

Inflation severely affects retirees by reducing their purchasing power and increasing lifestyle costs paid by distributions from investment portfolios. When inflation is high, consumers lose a large portion of their purchasing power, which makes a huge difference in their fixed income sources.

What to do with cash during inflation? ›

The best option for keeping up your personal finances when inflation rises is to keep a percentage of your money in long-term investments as part of a diversified portfolio. Retirement accounts, for example, are commonly used as a way to grow your money slowly over time and keep up with the natural rise of inflation.

Who are the losers from inflation? ›

1) Those belong to the fixed income groups. likes workers, salaried, employees, teachers, pensioners, creditors are the worst loser during inflation. The hardest hit is the persons who receive fixed incomes, usually called the middle class.

Does inflation hurt rich people? ›

So, yes, the inflation experience of high- and low-income households is not that different on the items that they purchase, but the low-income households spend virtually all their resources on inflation-affected items while the high-income spend a significantly smaller share on those items.

Who doesn t get hurt by inflation? ›

Stockholders. Stockholders get some protection from inflation because the same factors that raise the price of goods also raise the value of companies. Meanwhile, companies can raise prices to shelter their profitability from inflation, but some firms have thinner profit margins, such as retail and restaurants.

What will interest rates be in 2023 2024? ›

Direct Loan Interest Rates for 2023-2024
Loan Type10-Year Treasury Note High YieldFixed Interest Rate
Direct Subsidized Loans and Direct Unsubsidized Loans for Undergraduate Students3.448%5.50%
Direct Unsubsidized Loans for Graduate and Professional Students3.448%7.05%
1 more row
May 16, 2023

Will there be more interest rate hikes in 2023? ›

Don't bank on that pause lasting forever. After voting to leave interest rates unchanged in a target range of 5-5.25 percent, policymakers on the Federal Open Market Committee (FOMC) caught Fed watchers by surprise when they announced that they're also penciling in two more rate hikes for 2023.

How much difference does 1 percent make on a mortgage? ›

Mortgage rates increase in increments of 0.125%, and although one percent may seem like an insignificant amount, a quick glance at the numbers would tell you otherwise. As a rough rule of thumb, every 1% increase in your interest rate lowers your purchase price you can afford for the same payment by about 10%.

Should I keep a mortgage or pay it off? ›

It's typically smarter to pay down your mortgage as much as possible at the very beginning of the loan to save yourself from paying more interest later. If you're somewhere near the later years of your mortgage, it may be more valuable to put your money into retirement accounts or other investments.

How much interest will 50000 earn in a year? ›

An investor with $50,000 to invest for interest can earn from about $195 to about $2,300 in a year at current rates.

Will CD rates continue to rise? ›

According to Bankrate, by the end of 2023, the national average for one-year CDs is estimated to increase to 1.8% up from 1.38% at the end of 2022. Further, the national average for five-year CDs will reach 1.5% by the end of this year, with some of the highest-yielding accounts offering rates of 4.1%.

Where will interest rates be in 2027? ›

Interest Rates for 2021 to 2027. CBO projects that the interest rates on 3-month Treasury bills and 10-year Treasury notes will average 2.8 percent and 3.6 percent, respectively, during the 2021–2027 period. The federal funds rate is projected to average 3.1 percent.

How many times can you refinance your house? ›

There's no legal limit on the number of times you can refinance your home loan. However, mortgage lenders do have a few mortgage refinance requirements that need to be met each time you apply, and there are some special considerations to note if you want a cash-out refinance.

What will interest rates be at the beginning of 2023? ›

Mortgage rates continue to confound expectations. In 2022, rates surged past 7 percent far faster than anyone predicted. Then, in 2023, mortgage rates calmed, leading many observers to predict rates would fall all the way to the low 5 percent range this year.

What will 30-year mortgage rates be in 2023? ›

But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023. For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease.

How high will 30-year mortgage rates go in 2023? ›

While it expects the Fed to continue increasing rates to tame inflation, it believes that long-term rates have already peaked. “We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary.

Will mortgage rates go up in 2023 and 2024? ›

The Mortgage Bankers Association and the National Association of Realtors join Fannie in predicting a decline in mortgage rates starting in the second half of 2023 and continuing into 2024.

What is the highest interest rate in US history? ›

Interest rates reached their highest point in modern history in 1981 when the annual average was 16.63%, according to the Freddie Mac data. Fixed rates declined from there, but they finished the decade around 10%. The 1980s were an expensive time to borrow money.

What percentage of Americans have a home without a mortgage? ›

While millions of homeowners found it hard to keep up with payments when the pandemic hit, there's a percentage that managed to pay off their homes. In the US, 38% of homes are free of mortgages—giving their owners peace of mind during these trying financial times.

What is the lowest 30 year mortgage rate of all time? ›

By December 2020, the 30-year mortgage rate plummeted to a new historical low of 2.68%. Rates spent most of 2021 between 2.70% and 3.10%, giving many borrowers an opportunity to refinance or buy homes at the lowest rates ever recorded.

Will 2025 be a good year to buy a home? ›

After falling in 2023 and 2024, home prices are predicted to plateau in 2025 before rising again at just above the rate of inflation. However, due to the spike in home values from 2020 through 2022 due to record-low mortgage rates, median sales prices will take at least until 2027 to regain the highs of mid-2022.

What will interest rates look like in 2025? ›

An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.

How high will mortgage rates go in 2024? ›

Mortgage Interest Rate predictions for September 2024. Maximum interest rate 4.66%, minimum 4.25%. The average for the month 4.49%. The 30-Year Mortgage Rate forecast at the end of the month 4.38%.

Do I fix my mortgage for 2 or 5 years? ›

Whether you should fix your mortgage for 2 or 5 years depends on you and your circumstances. Fixing your mortgage for 2 years can give you certainty and stability in the short-term, and can also be the right choice if you only plan on staying in your home for a few years.

Will mortgage interest rates go down? ›

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased significantly in 2022. But mortgage rates are expected to trend down this year.

How long have interest rates been declining? ›

Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining.

Who gets the extra money when interest rates rise? ›

Interest rates and bank profitability are connected, with banks benefiting from higher interest rates. When interest rates are higher, banks make more money by taking advantage of the greater spread between the interest they pay to their customers and the profits they earn by investing.

Who benefits from high interest rates? ›

There are some upsides to rising rates: More interest for savers. Banks typically increase the amount of interest they pay on deposits over time when the Federal Reserve raises interest rates. Fixed income securities tend to offer higher rates of interest as well.

Does inflation eat away mortgage debt? ›

Inflation ensures that debt falls in real terms. The longer the term of a loan, the more borrowers benefit from the rate of depreciation of money.

Is inflation good if you have debt? ›

Inflation can negatively affect your debt because it often is accompanied by a rise in interest rates. With fluctuating rates, credit cards and other debt are likely to become more expensive as federal interest rates increase.

Who gets hurt and who benefits from inflation? ›

In summary: Inflation will hurt those who keep cash savings and workers with fixed wages. Inflation will benefit those with large debts who, with rising prices, find it easier to pay back their debts.

Who loses when there is inflation? ›

This is inflation's primary and most pervasive effect. An overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption. Consumers lose purchasing power regardless of what the inflation rate is—whether it's 2% or 4%.

Who benefited the most during inflation in an economy? ›

Inflation brings most benefits to debtors because people seek more money from debtors in order to meet the increased prices of commodities.

What interest rate should I pay off? ›

Pay Off the Card with the Highest Rate

If you've got unpaid balances on several credit cards, you should first pay down the card that charges the highest rate. Pay as much as you can toward that debt each month until your balance is once again zero, while still paying the minimum on your other cards.

Should I pay off my debt now? ›

Our recommendation is to prioritize paying down significant debt while making small contributions to your savings. Once you've paid off your debt, you can then more aggressively build your savings by contributing the full amount you were previously paying each month toward debt.

Who is hurt by unexpected inflation? ›

Lenders are hurt by unanticipated inflation because the money they get paid back has less purchasing power than the money they loaned out. Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.

Do rich people benefit from inflation? ›

This happens because inflation hurts the lower incomes but actually enriches the higher incomes. Imagine a family making $30,000 with no assets seeing a 5 percent annual inflation rate. They see their expense rise by 5 percent (losing $1,800 in buying power due to the inflation) and have no way of making it up.

What to do with money in high inflation? ›

What is inflation?
  1. Evaluate your savings. Where you keep your money can have a significant impact on how much that money is worth over time. ...
  2. Track your spending. ...
  3. Prioritize paying down high-interest debt. ...
  4. For new mortgages, consider an adjustable rate. ...
  5. Take advantage of rewards.

Who is hurt the most and least with inflation? ›

Inflation hurts poor people and those on fixed incomes the most. Inflation helps borrowers and investors in stocks, real estate, and commodities.

Who broke the back of inflation? ›

Paul Volcker and his Federal Reserve colleagues are lauded for “breaking the back of inflation” in 1981.

Do you lose money because of inflation? ›

Over time, inflation can reduce the value of your savings, because prices typically go up in the future. This is most noticeable with cash. If you keep $10,000 under your bed, that money may not be able to buy as much 20 years into the future.

What is causing inflation right now? ›

As the labor market tightened during 2021 and 2022, core inflation rose as the ratio of job vacancies to unemployment increased. This ratio is used to measure wage pressures that then pass through to the prices for goods and services. As workers bargain for better pay, firms begin to increase prices.


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